Luckily the title of this blog does not refer to a holiday nightmare but to that rare thing from the English courts….a decision NOT to lift the automatic suspension where a procurement decision has been challenged.
As readers will know under the Public Contract Regulations 2006 (as amended) a suspension of the procurement exercise arises automatically where legal proceedings are issued for breach of the Regulations. The same mechanism exists under the Utilities Contract Regulations 2006. Although in this case there was a dispute over whether the Utilities Contract Regulations applied, for the purpose of this blog the focus was on what test should be applied by the court when considering an application to lift the automatic suspension.
The automatic suspension provided for in the EU Remedies Directive 2007/66 (“the Directive”) which was implemented by the Regulations has since it was first considered by the English courts in Indigo Services v Colchester Institute been interpreted in accordance with the existing case law on injunctions and in particular the leading case of American Cyanamid Co v Ethicon Limited.
American Cyanamid lays down a two fold test for considering whether an injunction should be granted and those tests have been used by the English courts to consider whether or not an automatic suspension should be lifted. Firstly the courts will look at whether there is a serious issue to be tried and secondly where the ‘balance of convenience’ lies. A significant factor in ‘balance of convenience’ is whether damages would be an adequate remedy.
There has been some disquiet in procurement circles that the American Cyanamid test fails properly to take account of the text of the Directive and that its application in English cases (where the courts have invariably lifted the automatic suspension) has effectively deprived disgruntled bidders of a remedy.
While that issue has not been definitively decided the court did expressly conclude that the principles of the American Cyanamid test were sufficiently flexible to allow a proper consideration and application of the Directive. So, until such time as a case is appealed it seems the American Cyanamid test is here to stay on applications to lift the automatic suspension.
In relation to this case the court concluded that there was a serious issue to be tried. Looking at the balance of convenience it concluded that for the claimant damages would not be an adequate remedy. If the claimant established its allegations that undisclosed, irrational and inappropriate criteria had been used in the procurement then it would be very difficult for the court to calculate damages as it could not assess what chance had been lost and what the impact might have been on the process had rational and appropriate criteria been used. By contrast, the impact in damages on Gatwick of not yet being able to award the contract would be easily quantifiable.
The court also took into account that this was a 10 year contract and that the opportunity at Gatwick was unique. There had already been a substantial delay in the procurement process and there would be a substantial impact on the claimant’s reputation, goodwill and business if it lost the contract.
In those circumstances, the court would not lift the automatic suspension but did order an expedited trial which, we understand, will be before the end of this year.
A matter of days after this judgment what might be termed ‘normal service’ was resumed by the courts when it lifted the automatic suspension in a case involving the Ministry of Defence. A major factor in that decision was that a delay in awarding the contract could have a serious impact on the training and operational capability of the Army.
I think we are beginning to see to see a difference in approach between what might be characterised as purely commercial contracts such as the one at Gatwick and critical services impacting the safety or health of people as in the case of the Ministry of Defence.
In the former category courts may now be taking a more purposive view and recognising that lifting the suspension deprives litigants of a remedy at an early stage without a full and proper consideration of the merits. In the latter category, however, a view seems to be emerging that the public interest in maintaining a vital service outweighs the public interest in ensuring that litigants will have the full suite of remedies provided by the Directive.
There also appears to increasing attention from the courts on more general competition issues where procurement law is considered particularly in the context of the Utilities Contracts Regulations. In this case a very substantial factor in the decision appears to have been the length of the contract and the uniqueness of the opportunity. Our blog post of 26 March 2014 on the Luton airport case (Hobson’s Choice-Public Procurement gets a competition law makeover) highlights some of these competition issues in more detail.